Strength of the Dallas-Fort Worth Market

Dallas-Fort Worth (D-FW) was one of the top real estate construction markets in 2018, with more than $20 billion in project starts according to Jones Lang LaSalle (JLL), a leading commercial real estate services firm. This trend is showing no signs of slowing down. Two asset classes that are exhibiting considerable growth in the D-FW metro area are Retail and Office commercial real estate.

According to JLL, the D-FW area is anticipated to be the third busiest MSA for retail construction this year, with over 3M square feet underway at the start of 2019. Similarly, shared office space grew by approximately 20% last year to 2.5 million square feet, according to CBRE, a nationally renowned real estate brokerage and advisory firm. CBRE ranked D-FW seventh in terms of the area’s coworking footprint at the end of 2018.

Source: CBRE

What is fueling the market’s growth?

Real estate developers in Texas are capitalizing on emerging trends of skilled workforce migration, favorable income-tax treatment, and the enticement of low cost of living. A growing number of “18-hour cities” are emerging as feasible alternatives to pricey coastal gateway cities. Dallas-Fort Worth, for one, offers many of the perks of big city living alongside more palatable average rents and cost of living. With robust economic activity, it is likely that there will be more demand for migration to the D-FW area, which can impact the market positively.

LinkedIn captures monthly employment trends in the U.S. workforce. The most recent May 2019 edition provides insights into hiring, skills gaps, and migration trends across the country, which bodes well for the Texas market.

Austin, TX; Denver, CO; and San Diego, CA are the U.S. cities experiencing the most total in-migration (workers moving into a city). For every 10,000 LinkedIn members in Austin, TX, 657 arrived in the last 12 months. We can observe from the graphic above, the Dallas-Forth Worth area is exhibiting similar growth trends.

With the population of Texas growing rapidly, Dallas-Fort Worth maintains its spot as the top market for new home starts in the US, according to Metrostudy, a leading provider of primary and secondary market information to the housing industry. In fact, The Dallas Fed projects Texas employment will grow by at least 4 percent, well above the BLS’s projected 0.7% annualized nationwide job growth for the years 2016 through 2026.

Corporate transient contributing to robust hotel dynamics

A direct by-product of a strong labor market is increased activity from corporate transient guests, benefitting the Lodging industry. JLL ranks D-FW third nationally for 2019 hotel construction, trailing only NYC and Orlando. The 7,454 new rooms on the way at the start of the year represent 5 percent of the nationwide building total. The robust business environment in the market has translated into healthy occupancy rates and solid hotel fundamentals. Occupancy, average daily rates, and revenue per available room are all up – and at near all-time highs.

Source: JLL

For many hotels in burgeoning hotel markets, the majority of top-line revenue is derived from brand-loyal, “Corporate Transient” guests. This base of travelers typically pay a higher nightly room rate and are within the higher income demographics. Additionally, corporate guests usually book rooms in groups and reserve event space that helps drive revenue. A separate segment of guests is defined as “Leisure”, which historically exhibits more volatility in market downturns.

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